ENSIGN GROUP, INC

Previous wording

We are a provider of health care services across the post-acute care continuum. We engage in the operation, ownership, acquisition, development and leasing of skilled nursing, senior living and other healthcare-related properties and ancillary businesses located in 17 states. Our independent subsidiaries, each of which strive to be the operation of choice in the communities they serve, provide a broad spectrum of services. As of June 30, 2026, we offered skilled nursing, long-term acute care, senior living and rehabilitative care services through 396 skilled nursing and senior living facilities. Our real estate portfolio includes 181 owned real estate properties, which includes 142 facilities operated and managed by us, 39 operations leased to and operated by third-party operators and the Service Center location. Of the 39 third-party operations, one senior living operation is located on the same real estate property as a skilled nursing operation that we own and operate.

Current wording

We are a provider of health care services across the post-acute care continuum. We engage in the operation, ownership, acquisition, development and leasing of skilled nursing, senior living and other healthcare-related properties and ancillary businesses located in 17 states. Our independent subsidiaries, each of which strive to be the operation of choice in the communities they serve, provide a broad spectrum of services. As of September 30, 2026, we offered skilled nursing, long-term acute care, senior living and rehabilitative care services through 398 skilled nursing and senior living facilities. Our real estate portfolio includes 188 owned real estate properties, which includes 149 facilities operated and managed by us, 39 operations leased to and operated by third-party operators and the Service Center location. Of the 39 third-party operations, one senior living operation is located on the same real estate property as a skilled nursing operation that we own and operate.

Previous wording

Operational Expansions —During the six months ended June 30, 2026, we expanded our operations with the addition of 21 stand-alone skilled nursing operations and two campus operations in four states. These new operations added a total of 2,724 operational skilled nursing beds operated by our independent subsidiaries. Twenty of our expansions were in Texas, establishing it as our largest market with 105 skilled nursing and senior living operations and reinforcing our continued growth in the state where we began in 1999.

Current wording

Operational Expansions —During the nine months ended September 30, 2026, we expanded our operations with the addition of 23 stand-alone skilled nursing operations and two campus operations in five states. These new operations added a total of 2,974 operational skilled nursing beds and 135 operational senior living units operated by our independent subsidiaries. Our expansion efforts included 22 operations in Texas, establishing it as our largest market with 107 skilled nursing and senior living operations and reinforcing our continued growth in the state where we began in 1999.

Previous wording

Subsequent to June 30, 2026, we expanded our presence with the addition of two stand-alone skilled nursing operations in Texas, and these new operations will add 250 operational skilled nursing beds to be operated by our independent subsidiaries.

Current wording

Subsequent to September 30, 2026, we expanded our presence with the addition of 18 stand-alone skilled nursing operations and two campus operations in three states, including our entrance into Florida, our 18th state. These new operations will add 2,123 operational skilled nursing beds and 113 operational senior living units to be operated by our independent subsidiaries.

Previous wording

During thesix months ended June 30, 2026, Standard Bearer added $374.6 million of real estate assets associated with 18 stand-alone skilled nursing operations, three stand-alone senior living operations and two campus operations. Of these additions, three stand-alone senior living operations are leased to a third-party operator and the remaining additions are operated by our independent subsidiaries.

Current wording

During thenine months ended September 30, 2026, Standard Bearer added $543.1 million of real estate assets associated with 20 stand-alone skilled nursing operations, three stand-alone senior living operations and two campus operations, as well as the purchase of the real estate at five skilled nursing properties that we previously leased, further expanding Standard Bearer real estate portfolio during the third quarter of 2026. Of these additions, three stand-alone senior living operations are leased to a third-party operator and the remaining additions are operated by our independent subsidiaries.

Previous wording

Subsequent to June 30, 2026, Standard Bearer added approximately $36.0 million real estate assets associated with two stand-alone skilled nursing operations operated by our independent subsidiaries.

Current wording

Subsequent to September 30, 2026, Standard Bearer added approximately $19.5 million of real estate associated with one stand-alone skilled nursing operation that is operated by one of our independent subsidiaries.

Previous wording

Common Stock Repurchase Program —On May 13, 2026, the Board of Directors approved a stock repurchase program pursuant to which we are authorized to repurchase up to $40.0 million of our common stock under the program for a period of approximately 12 months from June 12, 2026. On June 12, 2026, the Board of Directors approved an amendment to the stock repurchase program pursuant to which we are authorized to repurchase an additional $60.0 million of our common stock under the program. During the three months ended June 30, 2026, we repurchased 257 shares of our common stock for $40.0 million. As of June 30, 2026, $60.0 million remained authorized and available for repurchase under the stock repurchase program.

Current wording

Common Stock Repurchase Program —On May 13, 2026, the Board of Directors approved a stock repurchase program, and on June 12, 2026, the Board of Directors approved an amendment, under which we are authorized to repurchase up to $100.0 million of our common stock under the program. During the nine months ended September 30, 2026, we repurchased 301 shares of our common stock for $47.4 million. As of September 30, 2026, $52.6 million authorized for repurchase remained available under the stock repurchase program.

Previous wording

We manage the fiscal aspects of our business by monitoring key performance indicators that affect our financial performance. Revenue associated with these metrics is generated based on contractually agreed-upon amounts or rate, excluding the estimates of variable consideration under the revenue recognition standard, Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 606. These indicators and their definitions include the following:

Current wording

We manage the fiscal aspects of our business by monitoring key performance indicators that affect our financial performance. Revenue associated with these metrics is generated based on contractually agreed-upon amounts or rates, excluding the estimates of variable consideration under the revenue recognition standard, Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 606. These indicators and their definitions include the following:

Previous wording

We believe that the regulatory environment surrounding the healthcare industry subjects providers to intense scrutiny. In the ordinary course of business, providers are subject to inquiries, investigations and audits by federal and state agencies related to compliance with participation and payment rules under government payment programs. These inquiries may originate from the Department of Health and Human Services (HHS), Office of the Inspector General (OIG), state Medicaid agencies, state Attorneys General, local and state ombudsman offices and the Centers for Medicare and Medicaid Services (CMS) Recovery Audit Contractors, among other agencies. In response to the inquiries, investigations and audits, federal and state agencies may impose citations for regulatory deficiencies and other regulatory penalties, including demands for refund of overpayments, expanded civil monetary penalties that extend over long periods of time and date back to incidents prior to surveyor visits, Medicare and Medicaid payment bans and terminations from those programs, which may be temporary or permanent in nature. We vigorously contest each such regulatory outcome when appropriate; however, there are significant legal and other expenses involved that consume our financial and personnel resources. Expansion of enforcement activity could adversely affect our business, financial condition or the results of operations.

Current wording

We believe that the regulatory environment surrounding the healthcare industry subjects providers to intense scrutiny. In the ordinary course of business, providers are subject to inquiries, investigations and audits by federal and state agencies related to compliance with participation and payment rules under government payment programs. These inquiries may originate from the Department of Justice, Department of Health and Human Services (HHS), Office of the Inspector General (OIG), the Centers for Medicare and Medicaid Services (CMS), state Medicaid agencies, state Attorneys General, and local and state ombudsman offices, among other agencies. In response to the inquiries, investigations and audits, federal and state agencies may impose citations for regulatory deficiencies and other regulatory penalties, including demands for refund of overpayments, expanded civil monetary penalties that extend over long periods of time and date back to incidents prior to surveyor visits, Medicare and Medicaid payment bans and terminations from those programs, which may be temporary or permanent in nature. We vigorously contest each such regulatory outcome when appropriate; however, there are significant legal and other expenses involved that consume our financial and personnel resources. Expansion of enforcement activity could adversely affect our business, financial condition or the results of operations.

Previous wording

Fiscal Year 2027 Skilled Nursing Facility Prospective Payment System Proposed Rule (FY 2027 PPS PR)— In April 2026, CMS released the FY 2027 PPS PR, which outlines proposed changes to SNF payment rates and program requirements beginning October 1, 2026. CMS is proposing a 2.4% net increase in SNF payment rates, reflecting a 3.2% market basket update offset by a 0.8% productivity adjustment, excluding any adjustments under the SNF Value-Based Purchasing (VBP) Program. The proposed rule also includes several changes to the SNF Quality Reporting Program (QRP), such as removing COVID-19 vaccination measures beginning in fiscal year 2028, shortening the data submission deadline from 4.5 months to 45 days after each quarter beginning in fiscal year 2029 and requiring SNFs to submit Minimum Data Set (MDS) data for all residents, regardless of payer source beginning in fiscal year 2031. Additionally, CMS proposes estimated performance standards for the fiscal year 2029 and fiscal year 2030 VBP Program years and updates to certain MDS-based VBP measure snapshot dates to align with the proposed QRP reporting deadlines. As this is a proposed rule, these provisions remain subject to change pending publication of the final rule later this year.

Current wording

Fiscal Year 2027 Skilled Nursing Facility Prospective Payment System Final Rule (FY 2027 PPS) — On July 29, 2026, CMS released the FY 2027 PPS, which outlines the changes to SNF payment rates and program requirements beginning October 1, 2026. CMS finalized a 2.4% net increase in SNF payment rates, reflecting a 3.3% market basket update offset by a 0.9% productivity adjustment, excluding any adjustments under the SNF Value-Based Purchasing (VBP) Program. The final rule also includes several changes to the SNF Quality Reporting Program (QRP), such as removing two COVID-19 vaccination measures beginning in FY 2028, shortening the data submission deadline from 4.5 months to 45 days after each quarter beginning in FY 2029 and requiring SNFs to submit MDS data for all residents receiving covered skilled nursing care regardless of payer, beginning with residents admitted or readmitted on or after October 1, 2029, for purposes of the FY 2031 SNF QRP. Additionally, CMS finalized SNF Value-Based Purchasing (VBP) Program performance standards for FY 2029 and FY 2030, consistent with the statutory requirement to provide advance notice of program standards.

Previous wording

Final Rule Updating Health-Care Related Tax Policies — In February 2026, CMS published a final rule, effective April 3, 2026, related to the statistical test used to evaluate state Medicaid health care-related tax waiver requests, implementing requirements codified in the One Big Beautiful Bill (OBBB). In relevant part, this rule limits the circumstances under which states may obtain waivers from CMS to impose taxes that fund state Medicaid programs by assessing taxes that impose a greater burden on Medicaid-participating organizations (whether based on volume or percentage of Medicaid taxable units) than the burden imposed on organizations that do not participate in Medicaid, or have relatively less Medicaid participation. While the rule primarily targets managed care organization taxes, it applies to all permissible provider tax classes, including nursing facilities, for which CMS has identified at least two existing taxes that appear to exploit the loophole. Non-MCO provider taxes, including nursing facility taxes, have a compliance deadline of the end of the applicable state fiscal year ending in calendar year 2028 (no later than September 30, 2028).

Current wording

Final Rule Updating Health-Care Related Tax Policies — On February 2, 2026, CMS published a final rule, effective April 3, 2026, related to the statistical test used to evaluate state Medicaid health care-related tax waiver requests, implementing requirements codified in the One Big Beautiful Bill (OBBB). In relevant part, this rule limits the circumstances under which states may obtain waivers from CMS to impose taxes that fund state Medicaid programs by assessing taxes that impose a greater burden on Medicaid-participating organizations (whether based on volume or percentage of Medicaid taxable units) than the burden imposed on organizations that do not participate in Medicaid, or have relatively less Medicaid participation. While the rule primarily targets managed care organization taxes, it applies to all permissible provider tax classes, including nursing facilities, for which CMS has identified at least two existing taxes that appear to exploit the loophole. Non-MCO provider taxes, including nursing facility taxes, have a compliance deadline of the end of the applicable state fiscal year ending in calendar year 2028 (no later than September 30, 2028).

Previous wording

Consolidated Appropriations Act of 2026 (CAA 2026)— On February 3, 2026, the Consolidated Appropriations Act of 2026 (CAA 2026) was passed, which further extended government funding through September 30, 2026. Of specific importance to our businesses are:

Current wording

Consolidated Appropriations Act of 2026 (CAA 2026)— On February 3, 2026, the Consolidated Appropriations Act of 2026 (CAA 2026) was enacted, providing government funding through September 30, 2026 and extending certain healthcare provisions. Of specific importance to our businesses are:

Previous wording

•Telehealth Waivers: Since the COVID-19 Pandemic, Congress has temporarily waived restrictions so Medicare beneficiaries can access telehealth services at home and outside of rural areas. Medicare recipients can now continue using telehealth under these relaxed rules, regardless of location. The waivers expired on September 30th but were reinstated effective October 1, 2025 and extended through December 31, 2027. Specifically, key waivers that were restored temporarily include:

Current wording

•Telehealth Waivers: Since the COVID-19 Pandemic, Congress has temporarily waived restrictions so Medicare beneficiaries can access telehealth services at home and outside of rural areas. Medicare recipients can now continue using telehealth under these relaxed rules, regardless of location. The waivers were extended through December 31, 2027. Specifically, key waivers that were restored temporarily include:

Previous wording

•Work Geographic Index Floor: Temporarily and retroactively restores nationwide payment floor multiplier for the work component of Medicare Part B services paid under the physician fee schedule. This is effective October 1, 2025 through at least September 30, 2026.

Current wording

•Work Geographic Index Floor: Temporarily restored the nationwide payment floor multiplier for the work component of Medicare Part B services paid under the physician fee schedule through the end of 2026.

Previous wording

Medicaid Recertification Changes and Retroactive Eligibility Cut— Beginning in the first quarter of 2027, states must conduct Medicaid eligibility redeterminations every six months, rather than annually, for individuals enrolled under Medicaid. Additionally, the OBBB includes a provision to reduce Medicaid retroactive eligibility from 90 days to 30 days for most enrollees but is 60 days for long-term care residents and traditional Medicaid enrollees. We believe that these provisions could create the conditions for coverage interruptions, potential delays or denied payments.

Current wording

Medicaid Recertification Changes and Retroactive Eligibility Cut— Beginning in the first quarter of 2027, states must conduct Medicaid eligibility redeterminations every six months, rather than annually, for individuals enrolled under Medicaid. Additionally, the OBBB includes a provision to reduce Medicaid retroactive eligibility from 90 days to 30 days for most enrollees and 60 days for long-term care residents and traditional Medicaid enrollees. We believe that these provisions could create the conditions for coverage interruptions, potential delays or denied payments.

Previous wording

Revisions to State-Directed Payments (SDPs) — Prior to the OBBB’s passage, state Medicaid programs could require Medicaid managed care organizations (MCOs) to pay providers certain rates, make uniform rate increases, or to use certain payment methods. These state-mandated payments by MCOs were known as SDPs, the upper limits for which generally were higher than the highest Medicare payment rate for those services, which is used in calculating Medicaid fee-for-service supplemental payments. The OBBB limits total payments under existing CMS-approved SDPs to current levels and caps future SDPs based on whether the state has expanded its Medicaid program under the ACA. SDPs approved prior to the OBBB’s implementation are grandfathered by the OBBB, although those grandfathered payments are reduced by 10% per year starting on January 1, 2028, until those SDPs reach the allowable Medicare-related payment limit. For Medicaid expansion states, new SDPs may not exceed 100% of the Medicare equivalent payment rate; for non-expansion states, the cap is 110%. In the absence of published Medicare payment rates, the OBBB limits SDPs to the Medicaid fee-for-service payment rate. This provision could reduce overall state Medicaid financing flexibility, increasing the risk of lower SNF reimbursement rates. CMS issued implementing guidance on February 2, 2026, clarifying that SDPs covering rating periods for CY 2024 to CY 2026 may be grandfathered and qualify for protection from the OBBB's reductions in payment, provided that a state seeking this protection provided CMS with completed forms seeking approval for such directed payments before May 1, 2025; however, grandfathered dollar amounts are frozen at current approved levels and cannot be increased through any preprint version, amendment, or renewal. SDPs in rating periods beginning on or after March 30, 2026, will not qualify for grandfathering and must immediately comply with the new payment caps based on Medicare payment rates. On May 22, 2026, CMS published a proposed rule to implement the SDP provisions (the SDP Proposed Rule) included in the OBBB. Under the proposal, payment limits based on Medicare rates would be expanded to apply to all services covered by SDPs beginning with rating periods on or after January 1, 2029. The SDP Proposed Rule also applies similar Medicare-based payment caps to certain targeted Medicaid fee-for-service payments.

Current wording

Revisions to State-Directed Payments (SDPs) — Prior to the OBBB’s passage, state Medicaid programs could require Medicaid managed care organizations (MCOs) to pay providers certain rates, make uniform rate increases, or to use certain payment methods. These state-mandated payments by MCOs were known as SDPs, the upper limits for which generally were higher than the highest Medicare payment rate for those services, which is used in calculating Medicaid fee-for-service supplemental payments. The OBBB limits total payments under existing CMS-approved SDPs to current levels and caps future SDPs based on whether the state has expanded its Medicaid program under the ACA. SDPs approved prior to the OBBB’s implementation are grandfathered by the OBBB, although those grandfathered payments are reduced by 10% per year starting on January 1, 2028, until those SDPs reach the allowable Medicare-related payment limit. For Medicaid expansion states, new SDPs may not exceed 100% of the Medicare equivalent payment rate; for non-expansion states, the cap is 110%. In the absence of published Medicare payment rates, the OBBB limits SDPs to the Medicaid fee-for-service payment rate. This provision could reduce overall state Medicaid financing flexibility, increasing the risk of lower SNF reimbursement rates. CMS issued implementing guidance on February 2, 2026, clarifying that SDPs covering rating periods for CY 2024 to CY 2026 may be grandfathered and qualify for protection from the OBBB's reductions in payment, provided that a state seeking this protection provided CMS with completed forms seeking approval for such directed payments before May 1, 2025 or July 4, 2025 pending on the type of payment; however, grandfathered dollar amounts are frozen at current approved levels and cannot be increased through any preprint version, amendment, or renewal. SDPs in rating periods beginning on or after March 30, 2026, will not qualify for grandfathering and must immediately comply with the new payment caps based on Medicare payment rates. On May 22, 2026, CMS published a proposed rule to implement the SDP provisions (the SDP Proposed Rule) included in the OBBB. Under the proposal, payment limits based on Medicare rates would be expanded to apply to all services covered by SDPs beginning with rating periods on or after January 1, 2029. The SDP Proposed Rule also applies similar Medicare-based payment caps to certain targeted Medicaid fee-for-service payments.

Previous wording

Medicare Annual Payment Rule—The FY 2027 PPS PR is discussed in detail within this Item under the heading Proposed, Anticipated and Recently Issued Rulemaking and Administrative Actions.

Current wording

Medicare Annual Payment Rule—The FY 2027 PPS discussed in detail within this Item under the heading Proposed, Anticipated and Recently Issued Rulemaking and Administrative Actions.

Previous wording

Medicare presently accounts for approximately 24.9% of our skilled nursing services revenue year-to-date, being our second-largest revenue payor. The Medicare program and its reimbursement rates and rules are subject to frequent change. These include statutory and regulatory changes, rate adjustments, administrative or executive orders and government funding restrictions, all of which may materially adversely affect the rates at which Medicare reimburses us for our services. Budget pressures often lead the federal government to reduce or place limits on reimbursement rates under Medicare. Implementation of these and other types of measures has in the past, and could in the future, result in substantial reductions in our revenue and operating margins.

Current wording

Medicare presently accounts for approximately 24.6% of our skilled nursing services revenue year-to-date, being our second-largest revenue payor. The Medicare program and its reimbursement rates and rules are subject to frequent change. These include statutory and regulatory changes, rate adjustments, administrative or executive orders and government funding restrictions, all of which may materially adversely affect the rates at which Medicare reimburses us for our services. Budget pressures often lead the federal government to reduce or place limits on reimbursement rates under Medicare. Implementation of these and other types of measures has in the past, and could in the future, result in substantial reductions in our revenue and operating margins.

Previous wording

Skilled Nursing Facility - Quality Reporting Program (SNF QRP)— The Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act) provided data reporting requirements for certain Post-Acute-Care (PAC) providers. If a SNF does not submit required quality data as required by the IMPACT Act, its payment rates are reduced by 2.0% for each such fiscal year, which may result in payment rates for a fiscal year being less than the preceding fiscal year.

Current wording

Skilled Nursing Facility - Quality Reporting Program (SNF QRP)— The Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act) provided data reporting requirements for certain post-acute care providers, including SNFs. SNFs that fail to satisfy applicable SNF QRP reporting requirements are subject to a 2.0% reduction in their annual Medicare payment update.

Previous wording

The SNF QRP standardized patient assessment data elements. The SNF QRP applies to freestanding SNFs, SNFs affiliated with acute care facilities and all non-critical access hospital swing-bed rural hospitals. These data elements are the subject of frequent change and adjustment. CMS's rulemaking often identifies new data elements to be reported.

Current wording

The SNF QRP standardized patient assessment data elements are the subject of frequent change and adjustment. CMS's rulemaking often identifies new data elements to be reported.

Previous wording

CMS continues to revise the calculation of its five-star ratings for the Nursing Home Compare website. Under this methodology, points are assigned to a SNF based on its performance across six measures: (1) case-mix adjusted total nurse staffing levels (including registered nurses, licensed practical nurses, and nursing aides), measured by hours per resident per day; (2) case-mix adjusted registered nurse staffing levels, measured by hours per resident per day; (3) case-mix adjusted total nurse staffing levels (including registered nurses, licensed practical nurses, and nursing aides), measured by hours per resident day on the weekend; (4) total nurse turnover, defined as the percentage of nursing staff that left the nursing home over a 12-month period; (5) registered nurse turnover, defined as the percentage of registered nursing staff that left the nursing home over a 12-month period; and (6) administrator turnover, defined as the percentage of administrators that left the nursing home over a 12-month period. These six measures will be measured on a quarterly basis.

Current wording

Accordingly, CMS continues to revise its Five-Star Quality Rating System for Nursing Home Compare. The staffing rating incorporates six quarterly measures: (1) case-mix adjusted total nurse staffing hours per resident day; (2) case-mix adjusted registered nurse staffing hours per resident day; (3) case-mix adjusted total nurse staffing hours per resident day on weekends; (4) total nurse turnover over a 12-month period; (5) registered nurse turnover over a 12-month period; and (6) administrator turnover over a 12-month period.

Previous wording

Sequestration of Medicare Rates — The Budget Control Act of 2011 requires a mandatory, across the board reduction in federal spending, called sequestration. Medicare FFS claims with dates of service or dates of discharge on or after April 1, 2013, incur a 2.0% reduction in Medicare payments through at least the end of 2025, unless Congress takes further action. The Consolidated Appropriations Act of 2023 (CAA 2023), waived a further 4.0% cut to Medicare spending that would have been required under the Statutory Pay-As-You-Go Act of 2010 (PAYGO) for fiscal years 2023 and 2024. Instead, the CAA 2023 deferred any further Medicare sequestration under PAYGO until fiscal year 2025. The CAA 2023 also offset planned Medicare sequestrations that would have been as high as 4.0% and instead maintained fee schedule cuts of approximately 2.0%. On October 29, 2024, the Medicare Patient Access and Stabilization Act of 2024 (MPASA) was introduced in the House of Representatives, seeking to increase the amount paid to physicians under Medicare by 4.73%. MPASA was referred to the House Ways and Means Committee and House Committee on Energy and Commerce on October 29, 2024, and referred to the Subcommittee on Health on December 17, 2024, with no further action taken on the bill, which did not pass into law before the end of the 118th Congress in December of 2024. As part of the Continuing Resolution that ended the federal government shutdown in late 2025 (CR), Congress reset the balances on PAYGO scorecard, which are used to determine whether a law creates a sufficient amount of budget deficit that it would require mandatory spending cuts like those to Medicare, to zero. Because the OBBB's requirements were likely to result in a deficit, the 4.0% deduction required by sequestration was expected to start in January of 2026 before the CR's passage. However, as the CR reset the PAYGO scorecards to zero, the expected 4.0% reduction of Medicare rates under sequestration will not materialize, further delaying the 4.0% reduction. On February 3, 2026, the CAA 2026 was passed and keeps the protections from the CR in place.

Current wording

Sequestration of Medicare Rates — The Budget Control Act of 2011 requires a mandatory, across the board reduction in federal spending, called sequestration. Medicare FFS claims with dates of service or dates of discharge on or after April 1, 2013, incur a 2.0% reduction in Medicare payments through at least the end of 2025, unless Congress takes further action. The Consolidated Appropriations Act of 2023 (CAA 2023), waived a further 4.0% cut to Medicare spending that would have been required under the Statutory Pay-As-You-Go Act of 2010 (PAYGO) for fiscal years 2023 and 2024. Instead, the CAA 2023 deferred any further Medicare sequestration under PAYGO until fiscal year 2025. The CAA 2023 also offset planned Medicare sequestrations that would have been as high as 4.0% and instead maintained fee schedule cuts of approximately 2.0%. On October 29, 2024, the Medicare Patient Access and Stabilization Act of 2024 (MPASA) was introduced in the House of Representatives, seeking to increase the amount paid to physicians under Medicare by 4.73%. MPASA was referred to the House Ways and Means Committee and House Committee on Energy and Commerce on October 29, 2024, and referred to the Subcommittee on Health on December 17, 2024, with no further action taken on the bill, which did not pass into law before the end of the 118th Congress in December of 2024. As part of the Continuing Resolution that ended the federal government shutdown in late 2025 (CR), Congress reset the balances on PAYGO scorecard, which are used to determine whether a law creates a sufficient amount of budget deficit that it would require mandatory spending cuts like those to Medicare, to zero. Because the OBBB's requirements were likely to result in a deficit, the 4.0% deduction required by sequestration was expected to start in January of 2026 before the CR's passage. However, as the CR reset the PAYGO scorecards to zero, the expected 4.0% reduction of Medicare rates under sequestration will not materialize, further delaying the 4.0% reduction. On February 3, 2026, the CAA 2026 was passed and keeps the protections from the CR in place. The Continuing Appropriations and Extensions Act, 2027, enacted September 2, 2026, funds the federal government through December 11, 2026 and included a provision that deemds the legislation to not add spending to the PAYGO scorecards.

Previous wording

The FY 2026 PPS finalized several updates, including setting performance standards for the FY 2028 and FY 2029 program years to meet statutory notice requirements. CMS will apply the previously established scoring methodology to the SNF WS PPR measure starting in FY 2028. Additionally, CMS removed the Health Equity Adjustment to simplify scoring and clarify incentives for quality improvement. A new reconsideration process was also adopted, enabling SNFs to request a review if they are dissatisfied with CMS’s decision on a correction request, beginning with the FY 2027 program year.

Current wording

The FY 2026 PPS finalized additional changes to the SNF VBP Program, including performance standards for the FY 2028 and FY 2029 program years, application of the established scoring methodology to the SNF WS PPR measure beginning in FY 2028, removal of the Health Equity Adjustment, and a new reconsideration process for certain correction requests beginning with the FY 2027 program year.

Previous wording

Part B Rehabilitation Requirements — A portion of our revenue is paid by the Medicare Part B program under a fee schedule. Part B services are limited with a payment cap by combined speech-language pathology services (SLP), physical therapy (PT) services and a separate annual cap for occupational therapy (OT) services. Part B services are limited by a payment cap as there is one amount for physical therapy (PT) services and speech-language pathology (SLP) services combined and a separate amount for occupational therapy (OT) services.

Current wording

Part B Rehabilitation Requirements — A portion of our revenue is derived from rehabilitative services reimbursed under the Medicare Part B Physician Fee Schedule (PFS), including speech-language pathology services (SLP), physical therapy (PT) services and occupational therapy (OT) services. Part B services are limited by a payment cap as there is one amount for PT services and SLP services combined and a separate amount for OT services.

Previous wording

The requirements under the Programs of All-Inclusive Care for the Elderly (PACE) provide greater operational flexibility and update information under the Medicare and Medicaid programs, including leniency in compliance with program requirements during and after a 3-year trial period and relieving restrictions placed on the team that assesses and provides for the needs of each PACE participant. Further, non-physician primary care providers can provide certain services in place of primary care physicians. The final rule, which went into effect on April 3, 2023, requires the collection of data by Medicare Advantage organizations and their service providers and the submission of data to CMS for risk adjustment data validation (RADV) audits. The purpose of these RADV audits is to maintain the accuracy of risk-adjusted payments made to Medicare Advantage organizations.

Current wording

The requirements under the Programs of All-Inclusive Care for the Elderly (PACE) provide greater operational flexibility and update information under the Medicare and Medicaid programs, including leniency in compliance with program requirements during and after a 3-year trial period and relieving restrictions placed on the team that assesses and provides for the needs of each PACE participant. Further, non-physician primary care providers can provide certain services in place of primary care physicians. The final rule, which went into effect on April 3, 2023, requires the collection of data by Medicare Advantage organizations and their service providers and the submission of data to CMS for risk adjustment data validation (RADV) audits. The purpose of these RADV audits is to maintain the accuracy of risk-adjusted payments made to Medicare Advantage organizations. Of note, the RADV rule has been vacated by the District Court for the Northern District of Texas on September 25, 2025; it remains enjoined as of the date of this Quarterly Report on Form 10-Q.

Previous wording

The IRA, which continued and expanded certain provisions of the ACA, extended the premium subsidies paid by the federal government, until the end of 2025, resulting in subsidies being available to offset or reduce the costs of private health insurance policies for qualifying individuals. This may aid older patients in obtaining or keeping their health insurance in order to pay for long-term care services.

Current wording

The IRA, which continued and expanded certain provisions of the ACA, extended the premium subsidies paid by the federal government, until the end of 2025, resulting in subsidies being available to offset or reduce the costs of private health insurance policies for qualifying individuals. This may aid older patients in obtaining or keeping their health insurance in order to pay for long-term care services. However, these subsidies have since ended and have not been renewed as of the date of this 10-Q, leading to drops in enrollment in ACA-sponsored policies.

Previous wording

Federal law also provides that the OIG has the authority to exclude individuals and entities from federally funded health care programs on a number of grounds, including, but not limited to, certain types of criminal offenses, licensure revocations or suspensions and exclusion from state or other federal healthcare programs. CMS can recover overpayments from health care providers up to six years following the year in which payment was made.

Current wording

Federal law also provides that the OIG has the authority to exclude individuals and entities from federally funded health care programs on a number of grounds, including, but not limited to, certain types of criminal offenses, licensure revocations or suspensions and exclusion from state or other federal healthcare programs. CMS can recover overpayments from health care providers up to six years following the year in which payment was made, and the agency recently received delegation to exclude individuals and entities under certain circumstances.

Previous wording

Over the years, the OIG has released the results of audit findings of Medicare overpayments, potentially affecting SNFs. These investigatory actions by OIG demonstrate its increased scrutiny into post-hospital SNF care provided to beneficiaries and may encourage additional oversight or stricter compliance standards. The DOJ has indicated that its healthcare enforcement trends would emphasize opioid prescribing, Medicare Advantage and managed care plan fraud, and COVID-19 related fraud, including under various relief programs available during and in conjunction with the pandemic. In November of 2023, OIG added to its work plan an audit of nursing homes' nurse staffing hours reported in CMS's payroll-based journal, for which OIG expected to issue a report in FY 2025. However, the report has not yet been issued. In addition, the OIG identified the following areas as its "key goals" for oversight: (1) protecting residents from fraud, abuse, neglect, and promoting quality of care; (2) promoting emergency preparedness and emergency response efforts; (3) strengthening frontline oversight; and (4) supporting federal monitoring of nursing homes to mitigate risks to residents.

Current wording

Over the years, the OIG has released the results of audit findings of Medicare overpayments, potentially affecting SNFs. These investigatory actions by OIG demonstrate its increased scrutiny into post-hospital SNF care provided to beneficiaries and may encourage additional oversight or stricter compliance standards. The DOJ has indicated that its healthcare enforcement trends would emphasize opioid prescribing, Medicare Advantage and managed care plan fraud, and COVID-19 related fraud, including under various relief programs available during and in conjunction with the pandemic. In addition, in June 2026, OIG issued an audit regarding the accuracy of nurse staffing hours reported through CMS's Payroll-Based Journal (PBJ) system and made recommendations to CMS regarding its oversight and validation of PBJ staffing data. In addition, the OIG identified the following areas as its "key goals" for oversight: (1) protecting residents from fraud, abuse, neglect, and promoting quality of care; (2) promoting emergency preparedness and emergency response efforts; (3) strengthening frontline oversight; and (4) supporting federal monitoring of nursing homes to mitigate risks to residents.

Previous wording

In November of 2025, OIG announced that along with the State survey agencies it would begin assessing the effect of ownership changes on quality of care provided in nursing homes via onsite surveys, state monitoring visits, and requesting additional documentation. The OIG's Fall 2025 semiannual report to Congress described the OIG's ongoing focus on the standard of care provided within SNFs and enforcement actions based on those concerns, as well as identifying certain nursing facilities' noncompliance with the return of provider relief funds paid to facilities during the COVID-19 PHE and which were due to be repaid to HHS. OIG announced in February of 2026 that it would be studying the efficacy and performance of nursing home pharmacy services' internal controls to prevent the diversion, misuse, and over-use of opioids in the nursing home setting. Subsequently, on May 28, 2026, the OIG issued its Spring 2026 semiannual report to Congress, identifying an estimated $462 million in potential overpayments based on stroke diagnoses that were incorrectly submitted to CMS. The report also outlined recommendations and control measures intended to improve data accuracy and reduce risks of future overpayments resulting from inaccurate clinical reporting.

Current wording

In November of 2025, OIG announced that along with the State survey agencies it would begin assessing the effect of ownership changes on quality of care provided in nursing homes via onsite surveys, state monitoring visits, and requesting additional documentation. OIG announced in February of 2026 that it would be studying the efficacy and performance of nursing home pharmacy services' internal controls to prevent the diversion, misuse, and over-use of opioids in the nursing home setting.

Previous wording

Certain states have adopted laws reflecting their concerns regarding ownership transparency. For example, Iowa adopted laws requiring disclosure of ownership information not previously required for licensure to promote transparency in 2023. In California, the California Department of Health Care Access and Information of the California Health and Human Services Agency issued its notice of approval of regulatory action in March 2024, establishing policies and procedures that implement financial and ownership transparency requirements for California-licensed SNFs that are required by California law passed in 2021. Additionally, the State of Washington enacted H.B. 1686 in July 2025, directing state agencies to develop a plan and recommendations for creating a registry of health care entities, including SNFs.

Current wording

Certain states have adopted laws reflecting their concerns regarding ownership transparency. For example, Iowa adopted laws requiring disclosure of ownership information not previously required for licensure to promote transparency in 2023. In California, the California Department of Health Care Access and Information of the California Health and Human Services Agency issued its notice of approval of regulatory action in March 2024, establishing policies and procedures that implement financial and ownership transparency requirements for California-licensed SNFs that are required by California law passed in 2021. As another example, Colorado has implemented enhanced reporting requirements intended to increase transparency regarding the ownership, related-party arrangements and financial operations of skilled nursing facilities. Additionally, the State of Washington enacted H.B. 1686 in July 2025, directing state agencies to develop a plan and recommendations for creating a registry of health care entities, including SNFs.

Previous wording

The California Office of Health Care Affordability (OHCA) requires for-profit healthcare entities to provide OHCA with written notice of proposed qualifying agreements or transactions (referred to as a “Material Change Notice”) at least 90 days prior to entering into the agreement or transaction. Reportable transactions are determined based on a variety of factors outlined in the applicable regulations.

Current wording

The California Office of Health Care Affordability (OHCA) requires healthcare entities to provide OHCA with written notice of proposed qualifying agreements or transactions (referred to as a “Material Change Notice”) at least 90 days prior to entering into the agreement or transaction. Reportable transactions are determined based on a variety of factors outlined in the applicable regulations.

Previous wording

Between March and September 2025, we provided OHCA with requested information regarding specific components of a proposed transaction. Despite our ongoing cooperation, on October 10, 2025, OHCA issued an investigatory subpoena to us to produce (among other things) certain confidential and proprietary documents. We timely responded to the investigatory subpoena and asserted objections. We have been unable to effect resolution including attempts to narrow the scope, and limit the requests to our independent subsidiaries operating in California. We have filed a Petition in the Superior Court of the State of California, County of Orange, seeking a declaration that the CMIR regulations violate the United States Constitution and/or the California Constitution, and is void and unenforceable as applied to us. We have also requested that OHCA be ordered to withdraw the subpoena and close the inquiry, so the underlying transaction can be completed.

Current wording

Between March and September 2025, we provided OHCA with requested information regarding specific components of a proposed transaction. Despite our ongoing cooperation, on October 10, 2025, OHCA issued an investigatory subpoena to us to produce (among other things) certain confidential and proprietary documents. We timely responded to the investigatory subpoena and asserted objections. We have been unable to effect resolution including attempts to narrow the scope, and limit the requests to our independent subsidiaries operating in California. We have filed a Petition in the Superior Court of the State of California, County of Orange, seeking a declaration that the CMIR regulations violate the United States Constitution and/or the California Constitution, and is void and unenforceable as applied to us. We have also requested that OHCA be ordered to withdraw the subpoena and close the inquiry, so the underlying transaction can be completed. The first hearing regarding this matter occurred on October 5, 2026, and we are currently waiting on a ruling.

Previous wording

Our total revenue for the three months ended June 30, 2026 increased $212.7 million, or 17.3%, compared to the three months ended June 30, 2025, while our diluted GAAP earnings per share grew by 16.7%, from $1.44 to $1.68, compared to the three months ended June 30, 2025. Our Same Facilities occupancy increased by 2.7% to 84.1% during the three months ended June 30, 2026 compared to the same period in 2025, demonstrating the increase in demand in our services and our ability to gain additional market share at our more mature operations. Further, our Transitioning Facilities occupancy increased by 2.3% to 84.7% compared to the same period in 2025, highlighting our ability to organically grow and transform underperforming operations that we have acquired.

Current wording

Our total revenue for the three months ended September 30, 2026 increased $187.6 million, or 14.5%, compared to the three months ended September 30, 2025, while our diluted GAAP earnings per share grew by 23.9%, from $1.42 to $1.76, compared to the three months ended September 30, 2025. Our Same Facilities occupancy increased by 1.6% to 84.1% during the three months ended September 30, 2026 compared to the same period in 2025, demonstrating the increase in demand in our services and our ability to gain additional market share at our more mature operations. Further, our Transitioning Facilities occupancy increased by 3.9% to 86.1% during the three months ended September 30, 2026 compared to the same period in 2025, highlighting our ability to organically grow and transform underperforming operations that we have acquired.

Previous wording

Throughout most of our history, operating results have been influenced by seasonal fluctuations in occupancy and patient acuity, most notably between the summer and winter months. Skilled nursing occupancy and skilled mix are typically strongest in the first and fourth quarters and softer in the second and third quarters. As expected, sequential seasonal trends resulted in lower occupancy and skilled mix during the period. Despite seasonal trends, both metrics exceeded our expectations, reflecting the strength of our clinical programs, local leadership teams, and disciplined operating model.

Current wording

Throughout most of our history, operating results have been influenced by seasonal fluctuations in occupancy and patient acuity, most notably between the summer and winter months. Skilled nursing occupancy and skilled mix are typically strongest in the first and fourth quarters and softer in the second and third quarters. In the three months ended September 30, 2026, however, we did not experience the typical seasonal softness, with both occupancy and skilled mix remaining stable or improving. This performance reflects our ability to capitalize on favorable demographic trends while leveraging the strength of our clinical programs, local leadership teams and disciplined operating model.

Previous wording

The resulting period over period progress, demonstrates our continued execution on targeted initiatives related to increasing occupancy and the level of acuity and complexity of the patients we serve in our facilities. We believe these capabilities, combined with our continued investment in people and our proven approach to acquiring and improving underperforming operations, position us well for sustained long-term growth.

Current wording

The resulting period over period progress demonstrates our continued execution on targeted initiatives related to increasing occupancy and the level of acuity and complexity of the patients we serve in our facilities. We believe these capabilities, combined with our continued investment in people and our proven approach to acquiring and improving operations, position us well for sustained long-term growth.

Previous wording

During the six months ended June 30, 2026, we added 23 new operations. We continue to generate healthy growth in both revenue and overall results as we continue to work diligently with existing and recently acquired operations, so that each operation can reach its full clinical and financial potential. We believe our ability to consistently improve clinical outcomes, enhance operational performance, and successfully integrate acquisitions supports our mission of delivering high-quality care while creating sustainable long-term value.

Current wording

During the nine months ended September 30, 2026, we added 25 new operations. We continue to generate healthy growth in both revenue and overall results as we work diligently with existing and recently acquired operations, so that each operation can reach its full clinical and financial potential. We believe our ability to consistently improve clinical outcomes, enhance operational performance, and successfully integrate acquisitions supports our mission of delivering high-quality care while creating sustainable long-term value.

Previous wording

•loss (gain) on long-lived assets and business interruption recoveries; and

Current wording

•loss (gain) on long-lived assets and business interruption recoveries;

Previous wording

Our total revenue increased by $212.7 million, or 17.3%, compared to the three months ended June 30, 2025. The increase in revenue was primarily driven by occupancy growth of 2.7% and 2.3% from our skilled services in Same Facilities and Transitioning Facilities, respectively, as well as higher patient acuity. In addition, contributions from our acquisitions increased our Recently Acquired Facilities revenue by $133.5 million, when compared to the same period in 2025.

Current wording

Our total revenue increased by $187.6 million, or 14.5%, compared to the three months ended September 30, 2025. The increase in revenue was driven by occupancy growth of 1.6% and 3.9% from our skilled services in Same Facilities and Transitioning Facilities, respectively, as well as higher patient acuity. In addition, contributions from our acquisitions increased our Recently Acquired Facilities revenue by $120.2 million, when compared to the same period in 2025.

Previous wording

Skilled services revenue increased by $206.3 million, or 17.6%, compared to the three months ended June 30, 2025. The increases in skilled services revenue were across all payer types, primarily driven by strong occupancy across our skilled services operations. Our consolidated occupancy increased by 2.0% to 82.9%, during the three months ended June 30, 2026 compared to the same period in 2025, with an increase in skilled days from our operations within Same Facilities and Transitioning Facilities.

Current wording

Skilled services revenue increased by $182.9 million, or 14.8%, compared to the three months ended September 30, 2025. The increases in skilled services revenue were across all payer types, primarily driven by strong occupancy across our skilled services operations. Our consolidated occupancy increased by 1.0% to 83.1%, during the three months ended September 30, 2026 compared to the same period in 2025, with an increase in skilled days from our operations within Same Facilities and Transitioning Facilities.

Previous wording

Revenue in our Same Facilities increased by $61.5 million, or 6.6%, compared to the three months ended June 30, 2025, due to increased occupancy from skilled days and revenue per patient day. Our continuous efforts to strengthen our partnerships with various managed care organizations, hospitals and local communities, increased our managed care revenue by 6.1%, resulting from an increase in managed care days and revenue per patient day. In addition to our growing Medicare Advantage market, we experienced meaningful growth in our Medicare patient base.

Current wording

Revenue in our Same Facilities increased by $52.5 million, or 5.6%, compared to the three months ended September 30, 2025, primarily due to increased occupancy, skilled mix days and revenue per patient day. Medicare revenue increased by 11.1%, driven by increases in both Medicare days and revenue per patient day, reflecting continued growth in our Medicare patient base.

Previous wording

Revenue in our Transitioning Facilities increased by $11.4 million, or 6.1%, compared to the three months ended June 30, 2025, due toimproved occupancy growth, increases in skilled mix days and revenue per patient day, acrossall payors. The increases reflect our operational fundamentals as we continue to transition and integrate these facilities.

Current wording

Revenue in our Transitioning Facilities increased by $10.1 million, or 5.4%, compared to the three months ended September 30, 2025, growing occupancy to 86.1%, increases coming from skilled mix days and revenue per patient day, acrossall payors. The increases reflect our operational fundamentals as we continue to transition and integrate these facilities.